Protecting the Domestic Market: Industrial Policy and Strategic Firm Behaviour
AbstractForeign firms to break into a new market commonly undercut domestic prices and, hence, subsidise the consumer's costs of switching in order to get a positive market share. However, this may constitute the act of dumping as drawn in Article VI of the General Agreement on Tariffs and Trade (GATT). Consequently, domestic firms trying to protect themselves against potential competitors often demand an anti-dumping (AD) investigation. In a two-period model of market entry with horizontally differentiated products and exogenous switching costs, it is demonstrated that the mere existence of switching costs and AD-rules may result in an anti-competition effect: the administratively set minimum-price rule protects the domestic firm and yields larger prices. Therefore, there are some consumers who will not buy either product in both periods although they would have done so in absence of AD. Consequently, competition policy should reassess the AD-regulation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000001622.
Date of creation: 15 Oct 2007
Date of revision:
Contact details of provider:
Web page: http://www.dklevine.com/
Other versions of this item:
- Jens Metge, 2007. "Protecting the Domestic Market: Industrial Policy and Strategic Firm Behaviour," Discussion Paper Series dp467, The Center for the Study of Rationality, Hebrew University, Jerusalem.
- Jens Metge, 2007. "Protecting the Domestic Market: Industrial Policy and Strategic Firm Behaviour," Levine's Bibliography 122247000000001644, UCLA Department of Economics.
- NEP-ALL-2007-10-20 (All new papers)
- NEP-COM-2007-10-20 (Industrial Competition)
- NEP-CSE-2007-10-20 (Economics of Strategic Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- von Weizsacker, C Christian, 1984. "The Costs of Substitution," Econometrica, Econometric Society, vol. 52(5), pages 1085-1116, September.
- Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, January.
- To, Theodore, 1994.
"Export subsidies and oligopoly with switching costs,"
Journal of International Economics,
Elsevier, vol. 37(1-2), pages 97-110, August.
- To, T., 1993. "Export Subsidies and Oligopoly with Switching Costs," Papers 9340, Tilburg - Center for Economic Research.
- To, T., 1993. "Export subsidies and oligopoly with switching costs," Discussion Paper 1993-40, Tilburg University, Center for Economic Research.
- Klemperer, Paul, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 375-94, May.
- Yongmin Chen, 1997. "Paying Customers to Switch," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 877-897, December.
- Carlsson, Fredrik & Löfgren, Åsa, 2004.
"Airline choice, switching costs and frequent flyer programs,"
Working Papers in Economics
123, University of Gothenburg, Department of Economics.
- Fredrik Carlsson & �sa Lofgren, 2006. "Airline choice, switching costs and frequent flyer programmes," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1469-1475.
- Hartigan, James C, 1996. "Perverse Consequences of the GATT: Export Subsidies and Switching Costs," Economica, London School of Economics and Political Science, vol. 63(249), pages 153-61, February.
- Ruqu Wang & Quan Wen, 1998. "Strategic Invasion in Markets with Switching Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(4), pages 521-549, December.
- Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
- Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine).
If references are entirely missing, you can add them using this form.